Can Carbon Trading Save Asia's Remaining Forests?

SHANGHAI -- Seven years after Costa Rica and Papua New Guinea called on the world to combat climate change by saving vanishing forests in the tropics, the marriage between emissions trading and forest protection has grown into something more than wedding vows, but it is still far away from generating a baby.\ That marriage was blessed by an international mechanism called REDD, short for Reducing Emissions from Deforestation and Forest Degradation. Through REDD, developed countries pay developing countries for keeping trees standing. While global negotiators are still discussing how to do this, some steps have already been taken on the ground.

In Asia, where forests are disappearing faster than in many other parts of the world, Western donors and international organizations have devoted millions of dollars and a lot of planning to prepare nations for the emerging mechanism. Financial specialists have also begun developing REDD pilot projects to experiment with forest carbon trading. The goal is to cash in on carbon dioxide that trees store up and, at the same time, to slow down the forest destruction in the region.

As big as this goal may be, the challenges in developing REDD projects that work are even bigger. Many pilot projects have generated nothing but a scar on the mechanism's reputation. Some people also question whether money generated from selling carbon credits could really flow across a corruption-prone region and wind up in the hands of the right people: villagers who are protecting the forests.

REDD supporters are scrambling to move faster. They need to build villagers' trust in the mechanism, and they think the survival of Asia's remaining forests may well depend on their efforts along with the future habitability of the region.

With larger swaths of forests being cut down in recent years, Asian countries are seeing less wildlife, losing groundwater and discovering more soil erosion. Human life is at risk, too, as thinned mangrove forests failed to protect South Asia from a tsunami that killed hundreds of thousands in 2004.

The theory has been that trees can lock climate-harmful carbon dioxide into centuries-long storage. But the reality has often been that the burning of forests to make way for agriculture ends their ability to absorb carbon. The burning also produces an immediate flow of carbon back to the air. As a result, forests now emit more greenhouse gas than all of the world's vehicles combined, with more than half that coming from Asia.

Trying to break the cycle of destruction
That leads to an urgent call to save Asia's forests. Already, some nations and international alliances have opened their wallets to do so, but "even if the money is very well spent, it is still not sufficient to bring the changes that are needed," said Thomas Enters, an expert at the U.N. Environment Programme. He has spent 19 years of his career in forest management in Asia and the Pacific.

But as industrialized countries committed to reduce emissions in a global climate treaty in 1997, forest protectors saw another solution: If rich nations need to meet emission reduction targets, why don't they do so by paying poorer nations to protect their forests? The idea was proposed in a United Nations conference in 2005, then got accepted in principle two years later.

How to do this on a global stage is still under negotiation, but nations like Japan have already moved ahead to link REDD with their own carbon offset programs. Australia and California, two emerging carbon markets, are also considering ways to let their emitters comply with their emission rules by buying some carbon credits generated from REDD.

Outside these emerging regulated markets, interest in REDD projects is also growing.

"In voluntary markets, buyers or investors are really looking for the story behind a project," said Naomi Swickard, manager at Verified Carbon Standard, a U.S.-based firm that audits environmental benefits of emissions reduction projects. She added that sponsoring REDD projects tells good stories. For example a hotel chain can show its effort to mitigate travelers' carbon footprint by investing in the protection of nearby rainforests.

But despite a high demand for REDD, there are few such credits in the market, due to difficulties generating them and accounting for their benefits. Carbon Conservation, an Australian firm, knows these problems well because the company has spent five years riding an on-and-off project development process in Aceh province, Indonesia.

It's not politically easy being REDD
The project was designed to protect 750,000 hectares (1.85 million acres) of forests -- home to tens of thousands of families and various species including endangered Sumatran tigers -- by originating up to 3.4 million tons of carbon credits every year for 30 years.

Its future sounded so promising that the project not only won support from the local government, it also persuaded U.S. brokerage firm Merrill Lynch to sign a carbon credit purchasing deal worth millions of dollars at that time. After passing a third-party validation for social and environmental benefits, it moved forward to creating carbon credits in 2008.

And that's where things started to get tricky. The project development first slowed down due to technical hurdles -- a shared headache among many pioneers, according to Ralph Strebel, vice president of Carbon Conservation. Then it stalled amid a busy election season in 2011. And when the elections finally ended earlier this year, the project was held up for a review because its political backer no longer governs the province.

Strebel said he has no knowledge of whether the new government is interested in REDD or when the review will be completed.

On an even larger scale, experts cite unstable policy as endangering the success of REDD projects. One ironic case came when Papua New Guinea -- which introduced the idea of REDD to the world -- froze pilot project development on its own land after a leadership change in 2009. (The nation recently elected a new leader and may renew its interest in REDD.)

Besides political risks, the collapse of the global economy has also affected REDD project development. Chances for raising funds to develop more saved forests appear remote in tougher times. And if and when that financing does come, that may be the beginning of another bumpy, leaky journey.

It is not a secret that forests stock carbon dioxide, but the amount of the carbon stored remains a mystery. To find out the answer, REDD project developers have to hike into forests with devices on their shoulders and measure emissions from each tree among tens of thousands. This process takes months and requires a repeat every year, as the emissions vary with the health of trees.

Fighting the 'carbon cowboys'
This, together with other time-consuming preparations, poses a threat to the mission of saving forests. That's because whenever REDD projects fail to deliver financial benefits as promised, villagers may go back to their traditional revenue sources: logging or replacing forests with agricultural land.

Some steps have already been taken in recent years to use technologies to speed up the process, like using satellite to enhance carbon monitoring. Other innovations are being rolled out to strengthen forest developers, with the world's first political risk insurance given to a REDD project in Cambodia last year.

At the same time, REDD supporters have been working hard to keep villagers on their side. The U.N.-REDD Programme, for one, taught villagers the right questions to ask if someone drops in and touts a REDD project. The program hopes to lessen the damage done by "carbon cowboys" -- a group of carbon credit dealers who promise expanding and often fictitious benefits to villagers in order to get them to sign a deal.

Despite all this work, there are still many problems that remain to be solved. Among them is the fact that a reduction in logging in some countries leads to pressure on other countries to cut down their forests to meet increasing demand.

Experts say a possible fix for this so-called international leakage is to spread the use of REDD. If more countries are able to cash in on their forests by protecting them and selling carbon credits, they are less likely to be lured astray by loggers.

With that in mind, Lowering Emissions in Asia's Forests, a program funded by the U.S. Agency for International Development, recently began coordinating countries in the Lower Mekong Basin, where similar types of forests grow, to share their lessons learned. Luke Pritchard, adviser for the program, said the idea is to avoid "reinventing the wheel" and to help these countries adapt REDD faster so more forests can be saved in a shorter time.

"There is a greater sense of emergency now with climate change," Pritchard said. "When we look at 12 to 15 percent of global greenhouse gas emissions coming from this sector, there is no way that we can have a comprehensive climate change strategy unless forests play an integral role on that."